San Francisco Financial Overview
Ben RosenfieldController
Ted EganChief Economist
February 2017
Presentation Outline
Economic update
City financial update
Risks
2Controller's OfficeCity and County of San Francisco
This Decade Has Brought Unprecedented Growth to San Francisco
Controller's Office ● City and County of San Francisco 3
400,000
450,000
500,000
550,000
600,000
650,000
700,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Employment in San Francisco, 1990-2015
17k jobsper year
25k jobsper year
Technology Industry Has Emerged as the City’s Primary Economic Driver
Controller's Office ● City and County of San Francisco 4
0%
5%
10%
15%
20%
25%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Technology Industry Share of Private SectorPayroll and Employment in San Francisco, 1990-2015
Technology Industry Share of Payroll
Technology Industry Share of Employment
Yet Employment Growth Has Continued Across the Board
Controller's Office ● City and County of San Francisco 5
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
Construction
Manufacturing
Trade, Transportation, Utilities
Information
Financial Activities
Business & Professional Services
Education & Health Services
Leisure & Hospitality
Other Services
Employment Growth By Sector, San Francsico and the United States, 2014-15
San Francisco
United States
Labor Market Has Found Full Employment – In the 3.0 - 3.3% Range for Nearly all of 2016 on a Seasonally-Adjusted Basis
Controller's Office ● City and County of San Francisco 6
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1990
1991
1991
1992
1992
1993
1994
1994
1995
1995
1996
1996
1997
1998
1998
1999
1999
2000
2001
2001
2002
2002
2003
2003
2004
2005
2005
2006
2006
2007
2008
2008
2009
2009
2010
2010
2011
2012
2012
2013
2013
2014
2015
2015
2016
2016
San Francisco Monthly Unemployment Rate, Seasonally-Adjusted,1990 - November 2016
Cost of Commuting Becoming an Ever-Larger Economic Drag on the City
Controller's Office ● City and County of San Francisco 7
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2011 2012 2013 2014 2015
Aggregate Value of Time Spent Commuting by Workers in San Francisco, 2011-2015 ($B)
12-month Trend in NASDAQ is Slower Relative to Earlier in the Decade, Venture Capital Funding is Declining
Controller's Office ● City and County of San Francisco 8
50
75
100
125
150
175
200
225
250
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Trends in the NASDAQ-100, Bay Area Venture Capital Investment, and San Francisco Metro Division Tech Employment, 2011-16
NASDAQ-100 12ma
Bay Area Venture Capital Investment 12ma
SF MD Tech Employment
Tech Slowdown Led to Slowdown in the Broader Economy Last Year
Controller's Office ● City and County of San Francisco 9
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Jan-
11
Mar
-11
May
-11
Jul-1
1
Sep-
11
Nov
-11
Jan-
12
Mar
-12
May
-12
Jul-1
2
Sep-
12
Nov
-12
Jan-
13
Mar
-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
May
-16
Jul-1
6
Sep-
16
Nov
-16
Annual Growth Rates in Tech and Private Non-Farm Employment,January 2011 - November 2016
Private Non-Farm
Tech Employment
Depending on Sources and Metrics, the Local Housing Market Has Either Slowed Down or Begun a Downturn
Controller's Office ● City and County of San Francisco 10
New York
Los Angeles
Chicago
Philadelphia
Phoenix
Las Vegas
San Diego
Dallas
San Jose
Jacksonville
San Francisco
Austin
Detroit
ColumbusMemphis
CharlotteEl Paso
Boston
Seattle
Denver
Washington
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Median Housing Value (September 2016 ) and Annual Change in Housing Prices (September 2015 - September 2016), Large U.S. Cities
Some National Economic Scenarios for the Next Few Years
• Baseline assumptions (50% chance the economy will be better, 50% worse).– Full employment in 2017, continuing until 2020– Fed funds rate gradually rising to 4%– Inflation gradually rising to 3%– Fiscal stimulus - $1.5 trillion in more-than-expected deficits in 10 years.– Despite this, US Dollar rises against Euro, Yen, Sterling– Slow rise in energy prices– Real GDP growth of 2.7% in 2017 and 3.0% in 2018
• A 90% Scenario (90% chance the economy will be worse in the near term):– Better-than-expected stock market and consumer confidence fuel more growth, and inflation, in
the near term– Interest rates rise faster, lead to an earlier slow-down compared to the baseline– Real GDP growth of 3.7% in 2017 and 3.2% in 2018
• And a 10% Scenario (10% chance the economy will be worse):– Stock market turns pessimistic on Trump, Brexit fears, Europe returns to recession– Mild recession begins this quarter, ends by the end of 2017– -0.4% GDP growth this year, 0.2% in 2018.
Controller's Office ● City and County of San Francisco 11
Diverse City revenue base captures broad array of economic activities
12Controller's OfficeCity and County of San Francisco
FY 2016-17
Sources of Funds Budget ($ Millions) % of Total
Property Taxes $1,412 29.1%Other Local Taxes 1,117 23.0%Intergovernmental - State 700 14.4%Business Taxes 669 13.8%Intergovernmental - Federal 253 5.2%Charges for Services 236 4.9%Other Revenues 61 1.3%Licenses, Permits & Franchises 29 0.6%Rents & Concessions 16 0.3%Other Revenues 14 0.3%Interest & Investment Income 5 0.1%Fines and Forfeitures 5 0.1%Intergovernmental - Other 1 0.0%Subtotal Regular Revenues $4,520 93.0%Transfers, Net 162 3.3%Prior Year Fund Balance 172 3.5%Prior Year Reserves 6 0.1%Total Sources $4,860 100.0%
Moderating revenue growth
Controller's Office ● City and County of San Francisco 13
Significant expenditure pressures
Controller's Office ● City and County of San Francisco 14
Growing structural General Fund budget gaps
Controller's Office ● City and County of San Francisco 15
Key drivers: Employee benefits & ballot measures
16Controller's OfficeCity and County of San Francisco
Revised pension outlook given recent set-backs
17Controller's OfficeCity and County of San Francisco
Cost of recent ballot measures
18Controller's OfficeCity and County of San Francisco
Other risks & considerations
Economic risks
Federal funding
State funding
Labor costs
19Controller's OfficeCity and County of San Francisco
Federal funding in the City’s budget
20Controller's OfficeCity and County of San Francisco
Questions, comments, thoughts?
21Controller's OfficeCity and County of San Francisco